Can Aerospace and Defense sectors be the next sweet spot for auto component makers?

One of the main concerns which was raised, both by component makers as well as players in the aerospace, is the bureaucratic hassles that needs to sorted out before the transition is made.J Srikant | ETAuto | Updated: May 17, 2016, 18:19 IST

NEW DELHI: Becoming a part of aerospace and defence sector supply chain seems like the next frontier that Indian auto component industry is now looking to cross. The commonality between the auto industry, aerospace and defence sectors has made the transition for auto component players possible, but with a catch. According to companies which are into aerospace and defence manufacturing, while the manufacturing process could be a lot similar, the investment required and the gestation periods are huge. According to companies which are into aerospace and defence manufacturing, while the manufacturing process could be a lot similar, the investment required and the gestation periods are huge.

“Auto component manufacturers looking to get into aerospace industry should be ready to accept the fact that there are no short term returns from this sector,” said Ashish Saraf vice president, Industry development, strategic partnerships & offsets, Airbus Group."

According to Jagmohan Singh, Regional Director, Lockheed Martin India, last year, nearly $15 billion procurement for aerospace happened and this number is expected to go up to $250 billion in next 10 years.

Speaking at the Second Aerospace and Defense Summit organised by Auto Component Manufacturers Association (ACMA), Saraf said that you have to stay invested for years and sometimes decades before capital starts flowing back into the business.

It was pointed out that not just the return periods, but the process to get into the system are equally long and strenuous. “The documentation process is huge and one needs to invest a lot of time on it,” said Saraf.

India Army said their processes require a lot of time. But they will looking at forming a cluster for component suppliers to ease procurement and better quality.

One of the panelist, in a lighter vein, said that sometimes the weight of the documents is much more than that of the component itself.

Maj. Gen S. Bhattacharya (VSM), Additional Director General, Directorate General of EME - India Army too said that their processes are not easy either and require a lot of time. “Our processes are not simple. However, we are committed to an interface with the industry."

He said that they will looking at forming a cluster for component suppliers as it will help in easy procurement and better quality.

However, auto component players say that they are ready to take up the challenge, both quality wise and investment wise. “We are getting orders from aerospace and defence sector not because of low cost, but because of our competency in engineering,” said FR Singhvi, joint managing director, Sansera Engineering. Singhvi is also the Chairman of Aerospace & Defence committee of ACMA.

He informed that out of the 700 odd members of ACMA, nearly 50 have come on board to explore the possibilities of the sector.

However, founder of one of the main component players who have turned immensely successful in aerospace, Belgaum-based Aequs, said that even though there is huge opportunity, auto component players should not enter this segment attracted just to that.

“You enter this segment not because there is opportunity, but for the reason that you have to be there,” said Aravind Melligeri, Chairman & CEO, Aequs.

Aequs recently won a big order from Airbus for 100,000 titanium component. Airbus said that they are looking at $2 billion sourcing of components till 2020. In 2015, Airbus sourced $500 million worth of components.

One of the main concerns which was raised, both by component makers as well as players in the aerospace, is the bureaucratic hassles that needs to sorted out before the transition is made.